Algae Company Joule Merges with Red Rock Biofuels
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Imagine being able to use synthetic biology to create a genetically altered organism that uses the sun’s energy to literally sweat ethanol or hydrocarbon fuels. Joule, a company we first wrote about just over 2 years ago, has created such an organism which they are still working to commercialize. Just last week, Joule announced that they have merged with another company called Red Rock Biofuels. Let’s take a look at what has taken place since our last article on Joule.
Oil Prices Crashed
When we first wrote about Joule in October of 2013, oil was sitting above $90 a barrel making the value proposition for biofuels very compelling. Since then, oil has halved in price with the current price sitting at around $40 a barrel. However, at full-scale commercialization, Joule still stands to be competitive as they claim a cost of $1.20 per gallon for “solar diesel” or “solar ethanol” which today cost about $2.50 and $1.50 per gallon respectively. Current investors also gave a vote of confidence to Joule’s business model in May of this year with another $40 million investment bringing Joule’s total funding to $200 million to date.
UPDATE 07/22/2017: Joule died
Regulatory Milestones Achieved
Joule has been making consistent progress on legal hurdles that need to be crossed before they can sell their biofuels commercially. In July of 2014, Joule became the first company to receive US EPA clearance for commercial use of modified cyanobacteria for fuel production. Just a few months ago, Joule’s fuel-grade Sunflow®-E ethanol was registered by the U.S. EPA for commercial use in E10 and E15 gasoline blends. This year, third-party tests initiated by Joule’s partner Audi showed that their ethanol meets ASTM standards in the U.S. and DIN standards in Germany.
C-Level Executive Ramp Up
Almost exactly one year ago to date, Serge Tchuruk was named President and CEO of Joule. Mr. Tchuruk was the former Chairman and CEO of Alcatel and prior to that, Chairman and CEO of Total SA. Peter Matrai, who comes with a decade of experience in the biofuels sector for BP, was named as their CFO. David Anton, an executive with 25 years at Dupont, was named as their CTO.
A Plan For Scaling
Joule has signed an MoU with Scatec Solar ASA to become the preferred supplier and operator of photovoltaic power installations for Joule plants, with an initial deployment goal of up to 25,000 acres. A deployment of this scale would generate up to 625 million gallons of ethanol or 375 million gallons of diesel per year, while consuming about 4 million tons of industrial waste CO2 annually in the process. Production of either product would generate revenues in the area of $1 billion a year at current prices. Joule plans to start constructing a 1000-acre production plant in 2017. The Company also made significant advancements with their technology last year achieving an industry first with a 100% increase in photosynthetic efficiency.
Merger with Red Rock Biofuels
There just isn’t that much out there about Red Rock Biofuels except what can be found on their sparse website. In March of this year, Flagship Ventures (the lead investor in Joule) made an undisclosed investment in Red Rock to develop a $200 million refinery. Slated to begin construction in late 2015, the refinery will use Fischer-Tropsch conversion to convert approximately 175,000 dry tons of woody biomass into at least 15 million gallons per year of renewable, liquid transportation fuels. Southwest and Fedex have already signed agreements to buy Red Rock’s biofuels which are expected to begin production next year. The project is also supported by a $70 million grant from various U.S. departments. So with all the failed biofuel stories around, what advantage does Red Rock have using a technology that’s been around since 1925? The CEO’s response to that question in an Xconomy article was, “We’re just a different group. We have hardhats in our DNA, not lab coats, and so we’re taking a very different path”.
The combined company will retain the name “Joule”, and now has two potential sources for biofuels; algae enabled by synthetic biology and wood chips enabled by an old, proven technology. Joule doesn’t seem to have any problems raising capital at the moment, but will most likely look for an exit to satisfy their current investors. Flagship Ventures, their lead investor, has a very impressive track record of successful exits including 8 IPOs in the past 2 years.
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